A Bad Transmission

Federal policymakers just slipped one over the Great American Public. It seems minor, but federal regulators just approveda new transmission line.

It was a major decision. Similar to the Keystone Pipeline, the Champlain Hudson Power Express crosses the international border and its construction requires presidential approval. Unlike the Keystone Pipeline, presidential approval was swift.

It gets better. The sole purpose of this 1,000-megawatt line is to damage U.S. utility assets. Specifically, Governor Cuomo wants to kill Entergy's (ETR) Indian Point nuclear generating station. This reliable source of power is located on the Hudson River, 40 miles north of New York City. Since 1973, it has been a critical source of round-the-clock energy for the city.

Indian Point is emission free. Its carbon footprint is near zero. It produces zero air pollutants. It produces zero greenhouse gases. It consumes virtually no water from the Hudson River. Because it is a three-loop design, any cooling water discharged into the Hudson River is clean.

Indian Point is safe. Its record is solid. Through years of operation, the plant has incredible levels of government oversight and no serious violations. In addition, it is virtually new: Through scheduled preventive maintenance programs, most moving parts have been replaced at least once and some new parts have undergone incremental improvements.

Indian Point is reliable. In fact, it is incredibly reliable. That is why Governor Cuomo decided to build a transmission line. Without an alternative source, the governor cannot shut the plant down and keep the city's lights on. By building a massively large transmission line from Canada to New York City, he displaces Indian Point, renders it redundant and pulls the plug. He also avoids building new gas turbines, which would violate his federally approved State Implementation Plan.

Just when you thought this project could not possibly get any weirder, it does. Consider for a moment Cuomo's decision to use Canadian power. He has surplus power bottled up in other parts of his state. In upstate New York, hydroelectric, wind, natural gas, co-generation and nuclear generators owned by dozens of private companies, Entergy, NRG Energy (NRG), Exelon (EXC) and others cannot get their products to market. Some, such as AES (AES) were forced to bankrupt their generating subsidiaries. They all need a new transmission line. Their governor had the opportunity to build that line. Instead, he chose to buy foreign power.

The hypocrisy is astounding. Members of the Obama Administration have spent the last several years wringing their hands over TransCanada's (TRP) Keystone XL Pipeline. At the same time, and with lightning speed, these same federal officials have used the same process to aid and abet Cuomo's plan to bypass state businesses, kill hundreds of high paying U.S. jobs, wipe out tax bases and seize shareholders' profits. Unlike Cuomo's jumper cable, Keystone actually helps the tax base, creates jobs and helps businesses.

At the state level, the hypocrisy is somewhat expected. New York State and the Cuomo family have had a decades-long feud with the nuclear power industry. Mario Cuomo killed Shoreham Nuclear Power Plant. That decision sent the state's investor-owned utility, Long Island Lighting (LILCo) into a tailspin and created reliability problems for Long Island's grid, which are still felt to this day. There is obviously little Cuomo love for other nuclear plant owners, even in economically challenged areas in upstate New York.

But at the federal level, this hypocrisy should disappoint voters. By waiting until the quiet days of August to announce presidential approval, the administration seems to be hoping that the public will not notice or will not have the time to connect the dots. In any event, the public appears to have been gamed.

Energy companies should avoid new investments in New York State. While officials may welcome your company, after substantial investments have been irrevocably committed, policymakers could turn.

Look no further than LILCo, Entergy and AES. According to Power Magazine, an AES subsidiary bought six coal plants from New York State for almost $1 billion and financed two other plants for $550 million. Two plants were closed in 2002. Two others were shuttered in 2011. The remaining plants were forced into bankruptcy in 2012. Production from these plants could not reach the market. As a result, they could not earn a break-even price.

Today, surplus power remains bottled up in upstate New York. Even coveted renewable energy cannot reach the state's major market. Yet, state leaders ignore that problem and instead opt to build a business-busting transmission line that bypasses the bottleneck and taps into foreign energy.